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Euro Zone Deflation Fears Fading

Euro zone inflationary pressures eased in September, but remain close to a seven-month high, suggesting inflation will pick up in coming months, a forward looking indicator showed on Friday.

The Economic Cycle Research Institute's Eurozone Future Inflation Gauge edged down to 86.6 in September from 87.3 in August, pulled down by falling inflationary pressures across the euro zone's leading four economies.

"Despite its latest dip the gauge remains close to August's seven-month high. Thus, deflation dangers in the euro zone have begun to fade," ECRI said in a report.

Official euro zone inflation was at -0.1 percent in October, the fifth month in a row of falling consumer prices. Yet economists expect it to pick up in the final months of the year, even if remaining well below the European Central Bank's ceiling of keeping inflation just under 2 percent. [ECILT/EU]

The ECB left its main interest rate on hold on Thursday at a record low of 1.0 percent. In a press conference following the decision ECB President Jean-Claude Trichet said inflation would turn positive in coming months and remain moderately positive over the medium term.